P 11-3 Computations (parent-company and entity theories)

Pop Corporation paid $1,190,000 cash for 70 percent of the outstanding voting stock of Son Corporation on January 2, 2017, when Son Corporation’s stockholders’ equity consisted of $1,000,000 of $10 par common stock and $500,000 retained earnings. The book values of Son’s assets and liabilities were equal to their fair values on this date.

During 2017, Pop Corporation had separate income of $600,000 and paid dividends of $300,000.

Son Corporation’s net income for 2017 was $180,000 and its dividends were $100,000. At December 31, 2017, the stockholders’ equities of Pop and Son were as follows (in thousands):

Pop Son Common stock ($10 par) $2,800 $1,000 Retained earnings 900 580 Total stockholders’ equity $3,700 $1,580 There were no intercompany transactions between Pop Corporation and Son Corporation during 2017. Pop uses the equity method of accounting for its investment in Son.

REQuIRED:

1. Assume that Pop Corporation uses parent-company theory for preparing consolidated financial statements for 2017. Determine the following amounts:

a. Pop Corporation’s income from Son for 2017

b. Goodwill that will appear in the consolidated balance sheet at December 31, 2017

c. Consolidated net income for 2017

d. Noncontrolling interest expense for 2017

e. Noncontrolling interest at December 31, 2017